Match List-I with List-II relating to benefits and cost of economic integration and identify the code…
According to Jacob Viner's customs union theory: Trade Creation shifts production from a higher-cost domestic producer to a lower-cost partner within the union (iii), while…
Choose your answer
Match List-I with List-II relating to benefits and cost of economic integration and identify the code representing correct matching.
List – I
List – II a. Trade creation i. Movement of production and resources in opposite directions.
b. Trade diversion
ii. Become active when a member country does not augment export but simply shifts its imports from low cost source to high cost source. c. Trade deflection
iii. Shifting the locus of production from high cost to low cost centre within the union.
d. Polarisation forces
iv. Goods produced in a third country entering a free trade area through a member country having lower tariff.
Answer and explanation
Correct answer C
According to Jacob Viner's customs union theory: Trade Creation shifts production from a higher-cost domestic producer to a lower-cost partner within the union (iii), while Trade Diversion shifts imports from a low-cost outside country to a higher-cost union partner (ii). Trade Deflection occurs in a Free Trade Area when third-country imports enter through the member state with the lowest external tariff (iv), and Polarisation Forces refer to the backwash/divergent movement of resources and production away from lagging regions (i).
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UGC NET Commerce